Australian property and loan markets are growing, thanks in part to asset finance.
While traditionally associated with equipment and vehicles, asset finance uses a company's balance sheet to borrow funds. The company borrowing money offers some of its assets as security to get upfront cash. The growth in asset financing is playing an increasingly important role in helping scale small businesses, as well as facilitating property transactions and developments. And it's offering even more opportunities for finance brokers across the nation.
"Aggregators are really pushing diversification with brokers. It enables brokers to grow their business and expand," Chris Paterson, general manager of distribution at non-bank lender Resimac, told Australian Broker. "And there are brokers who don't want to say no to a customer, so they're looking at product options for them, and looking to provide that whole product suite."
But while diversification is important, it isn't the only reason for growth. The developing industry can be attributed to several factors, including the increased need for both capital, as well as vehicles and equipment, and regulatory changes that make accessing loans at traditional banks more challenging.
"One of the reasons that triggered some of [the growth] is the government policies and regulation around instant write offs and things for tradies to buy tools for the trade, for example," said Adam Brown, National Australia Bank (NAB) broker distribution executive. "And as part of that, brokers can support that.
"You might want to be able to free up capital to go and invest in other things as a customer," Brown said. "And outlying money on a tractor, or a truck, or a car, or something like that, may not be the best way to utilize your capital. You may be best to take out some finance there to redeploy your capital elsewhere. And that is why there's a bit of a trend there, particularly when you've got a lot of self-employed customers, and you've got a lot of building and construction going on, helping manage cash flow in an environment where we've had, and still do have, high interest rates. Helping manage cash flow is a really important part [of that]. And so finance might be the best answer now to redeploy capital elsewhere."
In addition to heightened regulatory scrutiny, rising property valuations and development costs have made access to traditional bank loans more challenging for some buyers and developers to obtain.
George Dib, co-founder and chief executive officer of Sydney-based financial firm Co-Pilot Finance & Insurance, added that the increased use of referral partners in Australia's property and loan markets have "given a lot of brokerage firms more inkling to bring asset finance in house as well. And hence the reason why you've seen asset finance grow.
"A firm might say, 'we've used these referral partners in the past. We've seen that the referral partners have gotten the conversion. They're winning clients. This may be something that we've neglected in the past. So it needs to be brought in house where we can help facilitate those transactions and actually keep them ourselves,'" Dib said. "And I think the other thing that has helped in the changing of the landscapes is that the mortgage aggregators are now taking asset finance a lot more seriously, which means that they're putting a lot of money into those L&D functions to get their brokers to have an in-house service rather than use a referral service."
Meanwhile, small businesses — particularly in sectors such as hospitality, healthcare and manufacturing, where specialized equipment is integral to the property's function — are fueling growth. Loans are often taken out to finance fixtures and specialized equipment, or to simply add cash to a company's balance sheet. Asset finance solutions offer greater flexibility and can bridge funding gaps.
Commonwealth Bank (CBA) reported that vehicle and equipment financing was up 15% during its 2024 fiscal year, compared with 2023, while financing for shelving and furniture fittings was up 25% during the same period.
That's good news for brokers, many of whom are reporting increased inquiries for asset financing. Brokers with an understanding of asset financing can expand their service offerings, increase revenue streams and capitalize on the growth in the market by becoming a one-stop shop for clients' diverse financial needs. This can help strengthen client relationships and increase customer retention.
The growth in property-related asset finance also opens doors to new client segments, including small and medium-sized enterprises (SMEs) looking to upgrade their premises, or invest in specialized property assets.
Julian Fayad, founder and chief executive officer of New South Wales-based asset-based brokerage and fintech firm LoanOptions.AI, added that with asset finance there's the opportunity for faster turnaround times and higher returns.
"Based on your time," he said. "If you think about a personal loan, we can sell it in 24 hours. On a residential home loan, you [as a broker] make more commission on the home loan. But it's three months worth of work."
To effectively tap into this growing market, brokers need to equip themselves with the necessary knowledge and skills.
"Brokers need to know and be really clear about the speed of turnaround times, because their clients are going to be wanting certainty," said Chris Wyke, cofounder and chief executive officer of MA Financial. "And also, what are the policy parameters that the lenders have in order to meet their clients requirements."
Wyke pointed out that, unlike traditional property valuations, asset finance is often more complex than standard financing. It requires an understanding of the value and lifespan of various assets, including machinery, equipment and fixtures. Brokers need to be able to accurately assess these assets, as well as the overall property value, when structuring deals. Key considerations include security interests, loan terms and repayment schedules. Brokers also need to make sure they're compliant with the regulatory infrastructure of asset finance, which comes with its own set of rules.
In addition, the landscape of asset finance lenders can differ from traditional mortgage lenders. Brokers need to build relationships with specialist asset finance providers and understand their specific criteria and product offerings. This includes understanding financing options for green assets like solar panels and energy-efficient systems, which are gaining traction.
